Hi,
I am working as an HR Manager in a Manufacturing Company. I wanted to have a small clarification. If we are hiring employees, nearly 25, from a manpower contractor, we are paying PF and ESI to the contractor. I wanted to clarify, if the contractor doesn't pay the PF and ESI to the concerned department and falsifies our company, who is responsible for this? If any issues arise, who is responsible - whether we are responsible or the contractor? We are going to release the payment based on the bill. In that case, how will we be held responsible? This is my question because we have valid proof that we are providing the money to the contractor through the bill we possess.
Kindly clarify for me.
From India, Madras
I am working as an HR Manager in a Manufacturing Company. I wanted to have a small clarification. If we are hiring employees, nearly 25, from a manpower contractor, we are paying PF and ESI to the contractor. I wanted to clarify, if the contractor doesn't pay the PF and ESI to the concerned department and falsifies our company, who is responsible for this? If any issues arise, who is responsible - whether we are responsible or the contractor? We are going to release the payment based on the bill. In that case, how will we be held responsible? This is my question because we have valid proof that we are providing the money to the contractor through the bill we possess.
Kindly clarify for me.
From India, Madras
Firstly, has the contractor taken the license from the office of the Labour Commissioner to provide contractual manpower to your outfit.
Secondly, it is always the principal employer who is responsible for all submissions of ESI and PF. You can keep a tab on the contractor by directing him to provide ESI and PF numbers of contractual manpower being supplied to you. Moreover, you should also demand periodic returns submitted by him regarding ESI and PF.
Thirdly, make an agreement with the contractor on Stamp Paper which shall include all clauses related to ESI and PF.
From India, Delhi
Secondly, it is always the principal employer who is responsible for all submissions of ESI and PF. You can keep a tab on the contractor by directing him to provide ESI and PF numbers of contractual manpower being supplied to you. Moreover, you should also demand periodic returns submitted by him regarding ESI and PF.
Thirdly, make an agreement with the contractor on Stamp Paper which shall include all clauses related to ESI and PF.
From India, Delhi
If my contractor doesn't pay PF and ESI for the employees, who is now getting into trouble? As an employer, are we getting into trouble, or is it my contractor? Even though we have records showing that we paid the necessary amount to the contractor for PF and ESI, who is in trouble now?
From India, Madras
From India, Madras
Hi Mukesh,
I completely agree with what Shahid Kumar has shared. Moreover, you can practice asking for paid PF and ESI challans as enclosures along with the bill for the next month. Without these enclosures, you should not process the bill for payment. This way, you can cross-check anytime with the respective authority to ensure compliance.
Best,
Mukesh T.
From India, Vadodara
I completely agree with what Shahid Kumar has shared. Moreover, you can practice asking for paid PF and ESI challans as enclosures along with the bill for the next month. Without these enclosures, you should not process the bill for payment. This way, you can cross-check anytime with the respective authority to ensure compliance.
Best,
Mukesh T.
From India, Vadodara
my question is this, if this problem is arised means. whom the government is going to claim whether me or else contractor
From India, Madras
From India, Madras
how a employer will get the problem because i already paid to the contractor. government as to claim only from the contractor right
From India, Madras
From India, Madras
what will be the consequence if he does not registered with pf and esi. and what will be the consequences if he registered with pf and esi
From India, Madras
From India, Madras
Dear Govind,
You are requested to ask for the PF and ESI code number allotted by the contractor. Instead of directly paying the contractor for ESI/PF, kindly deduct the amount from his bill. You can then make the remittance on a monthly basis on his behalf. Prepare the cheque for ESI/PF yourself and add it along with the bill amount. This approach can help alleviate your concerns.
Please send a test email to my address, and I will forward you the contractor Audit sheet.
Email: dineshrajasekar@tatainternational.com
Thank you.
From India, Madras
You are requested to ask for the PF and ESI code number allotted by the contractor. Instead of directly paying the contractor for ESI/PF, kindly deduct the amount from his bill. You can then make the remittance on a monthly basis on his behalf. Prepare the cheque for ESI/PF yourself and add it along with the bill amount. This approach can help alleviate your concerns.
Please send a test email to my address, and I will forward you the contractor Audit sheet.
Email: dineshrajasekar@tatainternational.com
Thank you.
From India, Madras
Hi,
I completely agree with Shahid and the comments backed up by the members. It's the sole responsibility of the contractor to pay this, and you as a client are not answerable.
-Siddharth
From India, Bangalore
I completely agree with Shahid and the comments backed up by the members. It's the sole responsibility of the contractor to pay this, and you as a client are not answerable.
-Siddharth
From India, Bangalore
Hi Govind Suresh,
By giving the manpower supply to contractors, the company's liability in relation to the statutory obligations does not dissolve. If you award a contract to another person, he will only be registered as your co-contractor after the issuance of a Form-V certificate duly filled and signed by your official, stating that you will be responsible for any discrepancies in the future regarding statutory obligations. Only after this process, the contractor will be registered and can start work in your company.
Regarding ESI & EPF compliances, you must ensure that his company is registered under the ESI & EPF Acts. If it is not registered under these Acts, you should advise him to get registered. If registration is not possible, you must allow him to comply with your company's codes and ensure the correctness of the compliances in any manner. Even if you have bills, the responsibility will not be exhausted.
From India, Hyderabad
By giving the manpower supply to contractors, the company's liability in relation to the statutory obligations does not dissolve. If you award a contract to another person, he will only be registered as your co-contractor after the issuance of a Form-V certificate duly filled and signed by your official, stating that you will be responsible for any discrepancies in the future regarding statutory obligations. Only after this process, the contractor will be registered and can start work in your company.
Regarding ESI & EPF compliances, you must ensure that his company is registered under the ESI & EPF Acts. If it is not registered under these Acts, you should advise him to get registered. If registration is not possible, you must allow him to comply with your company's codes and ensure the correctness of the compliances in any manner. Even if you have bills, the responsibility will not be exhausted.
From India, Hyderabad
Dear Govind,
Ultimately, the responsibility of compliance lies with the principal employer, not with the contractor. If you do not have proof of compliance challans, you are in trouble. Firstly, get in touch with the contractor and inform him regarding penalties and jail time for non-payment of PF and ESI. Also, discuss the same with a legal consultant and seek further advice and actions.
Thank you,
Sai Nandan
From India, Bhopal
Ultimately, the responsibility of compliance lies with the principal employer, not with the contractor. If you do not have proof of compliance challans, you are in trouble. Firstly, get in touch with the contractor and inform him regarding penalties and jail time for non-payment of PF and ESI. Also, discuss the same with a legal consultant and seek further advice and actions.
Thank you,
Sai Nandan
From India, Bhopal
Dear, it is very clear from the P.F. & E.S.I. Act that for contract labor, the Principal Employer is fully responsible for the contribution if not paid by the contractor. If your contractor has his own PF & ESI code, you just need to ensure that and take a photocopy of the certificates from the contractor.
To ensure the deposition of payment of contribution, you can deposit the same through challans on his code numbers and just put a stamp on the challans as "EMPLOYEES ENGAGED AT-------------------(your company name)" so that the contractor cannot use your challan at any other company.
It is also mentioned here that you may deduct the deposited amount from his bill, i.e., you just pay the amount after deducting the ESI & PF contribution. This way, you can save your company, and your company will be safe.
V.K. Gupta
From India, Delhi
To ensure the deposition of payment of contribution, you can deposit the same through challans on his code numbers and just put a stamp on the challans as "EMPLOYEES ENGAGED AT-------------------(your company name)" so that the contractor cannot use your challan at any other company.
It is also mentioned here that you may deduct the deposited amount from his bill, i.e., you just pay the amount after deducting the ESI & PF contribution. This way, you can save your company, and your company will be safe.
V.K. Gupta
From India, Delhi
I have seen a lot of transactions between you and other professionals.
I would like to provide you with the legal standpoint. Firstly, for all violations of statutes by any contractor or agents, the principal employer is mainly responsible. Even though you have paid the money to the contractor, if the contractor has not paid, you must have ensured whether he has paid or not. If he has shown fake challans, it is the employer's responsibility to check the proof correctly and not the contractor's. Maybe you can take criminal action against the contractor for cheating under section 420; however, you must have ensured all payments, and you cannot escape the fact that the contractor has not paid and what the employer can do. If the authorities accept your plea, every company can appoint a contractor who, in turn, shows fake challans, and the employer can escape from action. So, you have to face the action. You need not fear; the authorities may seek the amount that has not been paid with penalty, damages, and interest for the non-remitted amount. No other action will they take.
Hope you are clear.
From India, Madras
I would like to provide you with the legal standpoint. Firstly, for all violations of statutes by any contractor or agents, the principal employer is mainly responsible. Even though you have paid the money to the contractor, if the contractor has not paid, you must have ensured whether he has paid or not. If he has shown fake challans, it is the employer's responsibility to check the proof correctly and not the contractor's. Maybe you can take criminal action against the contractor for cheating under section 420; however, you must have ensured all payments, and you cannot escape the fact that the contractor has not paid and what the employer can do. If the authorities accept your plea, every company can appoint a contractor who, in turn, shows fake challans, and the employer can escape from action. So, you have to face the action. You need not fear; the authorities may seek the amount that has not been paid with penalty, damages, and interest for the non-remitted amount. No other action will they take.
Hope you are clear.
From India, Madras
Dear Govind,
I completely agree with Shahid and Dinesh. If you fail to obtain the ESI and EPF codes from your contractor and neglect to deposit the required amounts for ESI & EPF, then both departments will recover those amounts from the Principal Employer based on the wages paid to the contractor at 6.5% for ESI with an interest rate of approximately 13%, and for EPF at 25.61% with an interest rate of nearly 13%.
Regards,
Rizwan
From India, Haryana
I completely agree with Shahid and Dinesh. If you fail to obtain the ESI and EPF codes from your contractor and neglect to deposit the required amounts for ESI & EPF, then both departments will recover those amounts from the Principal Employer based on the wages paid to the contractor at 6.5% for ESI with an interest rate of approximately 13%, and for EPF at 25.61% with an interest rate of nearly 13%.
Regards,
Rizwan
From India, Haryana
I read the whole discussion, and everything posted was very correct legally and socially.
The main question of Govind is who is responsible. The whole onus of responsibility is on the Principal Employer for any non-compliance of statutory requirements.
Sanjeev Kumar
From India, Pune
The main question of Govind is who is responsible. The whole onus of responsibility is on the Principal Employer for any non-compliance of statutory requirements.
Sanjeev Kumar
From India, Pune
Principal employers will be responsible for wages and their social security contributions if the contractor fails to clear their dues or social security contributions.
Ajay Kumar Mishra
From India, Delhi
Ajay Kumar Mishra
From India, Delhi
At the outset, it is your responsibility as the PRINCIPAL EMPLOYER to ensure that the contractor appointed by you is abiding by all the legal requirements. The government will catch you first when they see the records. Hence, it is very much essential that before the contract is awarded, you must ensure that the contractor is willing to abide by all statutory requirements.
Though the law permits that you can deduct these dues from the bills of the contractor afterwards. Please refer to the Contract Labour (Abolition and Regulation) Act.
Milind Naik
From India, Mumbai
Though the law permits that you can deduct these dues from the bills of the contractor afterwards. Please refer to the Contract Labour (Abolition and Regulation) Act.
Milind Naik
From India, Mumbai
To answer your query, the organization on whose payroll the employee is working will be responsible. What you can do to get out of this mess is seek clarification from the contractor regarding the same. You can also make an amendment in the SLA for the same to safeguard your firm's interest.
From India, Mumbai
From India, Mumbai
Hi, I agree with Mukesh thakkar, we also follow the same procedure. Our contractor submit copy of PF&ESI challan along with bill.
From India, Kozhikode
From India, Kozhikode
Dear Govind,
I have gone through the above question and replies given by our friends. You should collect the following documents with your contractor right now:
1) Contract registered license (Department of Labour)
2) Agreement made by the company & contractor
3) Half-yearly returns
4) PF code number allotment copy
5) ESIC code number allotment copy
6) Service Tax registration copy
7) PT registration copy
8) Any policies like travel, local conveyance, etc.
9) Monthly salary register
10) OT register
The principal employer is responsible if the contractor does not pay the amount to the departments. Conduct an audit on your contractor right now. Ask him to produce all the above documents and verify each and everything. If you find any fraud, ask him to pay immediately to the department.
Thank you.
From India, Bangalore
I have gone through the above question and replies given by our friends. You should collect the following documents with your contractor right now:
1) Contract registered license (Department of Labour)
2) Agreement made by the company & contractor
3) Half-yearly returns
4) PF code number allotment copy
5) ESIC code number allotment copy
6) Service Tax registration copy
7) PT registration copy
8) Any policies like travel, local conveyance, etc.
9) Monthly salary register
10) OT register
The principal employer is responsible if the contractor does not pay the amount to the departments. Conduct an audit on your contractor right now. Ask him to produce all the above documents and verify each and everything. If you find any fraud, ask him to pay immediately to the department.
Thank you.
From India, Bangalore
Dear Govind,
Before signing the contract, please check his PF/ESI license. He should provide you with a copy of the same along with his quote.
He should also provide you with a copy of the Challan indicating the deposit of PF/ESI for the employees working with you.
In the event of inspectors visiting your facility, it is your responsibility to account for all employees, including contractual staff. The contractor will be approached later.
Therefore, always insist on obtaining the Challans and thoroughly examine them for the remittances of the people working with you.
Regards,
Col
From India, Mumbai
Before signing the contract, please check his PF/ESI license. He should provide you with a copy of the same along with his quote.
He should also provide you with a copy of the Challan indicating the deposit of PF/ESI for the employees working with you.
In the event of inspectors visiting your facility, it is your responsibility to account for all employees, including contractual staff. The contractor will be approached later.
Therefore, always insist on obtaining the Challans and thoroughly examine them for the remittances of the people working with you.
Regards,
Col
From India, Mumbai
Dear, Monitoring without periodically gap is must. Payment of ESI and EPF directly is better than payment to Contractor. JP Singh
From India, New Delhi
From India, New Delhi
According to the Act, no contractor to whom this Act applies shall undertake or execute any work through contract labor except under and in accordance with a license issued by the licensing officer. Therefore, you should ask for a license from your contractor.
Now, my contractor didn't pay the PF and ESI even though we paid him. From whom will the government collect, and what action will be taken by the government for the contractor and the employer?
Regards, Suresh
From India, Madras
Regards, Suresh
From India, Madras
Hi As principle employer you are liable to pay the contributions if the contractor has not paid, and the authorities will initiate action on the principle employer.
From India, Mumbai
From India, Mumbai
Hi,
Yes, the Principal Employer (Your Company) is responsible for that. If you want to avoid those problems, you must ask your contractor to fill a separate challan (PF) at the bank and request an Annual return copy for your records. You should conduct an audit every 6 months for all statutory compliance. For PF, you should ask for 3A, 9, 12A. ESIC requires an RC (which needs to be submitted every 6 months). Professional tax requires calculation (if paid combined) or ask for a separate payment.
If you have any queries, please call me, Sachin, at 09822027644.
From India, Pune
Yes, the Principal Employer (Your Company) is responsible for that. If you want to avoid those problems, you must ask your contractor to fill a separate challan (PF) at the bank and request an Annual return copy for your records. You should conduct an audit every 6 months for all statutory compliance. For PF, you should ask for 3A, 9, 12A. ESIC requires an RC (which needs to be submitted every 6 months). Professional tax requires calculation (if paid combined) or ask for a separate payment.
If you have any queries, please call me, Sachin, at 09822027644.
From India, Pune
Hi Govind,
Of course, the contractor is going to be in trouble. When finalizing a vendor, you should have cross-checked all necessary documents like a license, etc. You can still ask for the same and challans month on month from the contractor to ensure proper submission of ESI/PF. Supporting documents are compulsory for accounts people to release their PF and ESI bills. I hope you are collecting challans from the contractor every month.
Anyway, you don't need to worry. Still, I suggest you cross-check the necessary documents.
From India, Bangalore
Of course, the contractor is going to be in trouble. When finalizing a vendor, you should have cross-checked all necessary documents like a license, etc. You can still ask for the same and challans month on month from the contractor to ensure proper submission of ESI/PF. Supporting documents are compulsory for accounts people to release their PF and ESI bills. I hope you are collecting challans from the contractor every month.
Anyway, you don't need to worry. Still, I suggest you cross-check the necessary documents.
From India, Bangalore
Dear Govind,
You can send an application to your nearest ESI/PF department regarding the PF/ESI amount that has been paid to the contractor, and said contractor still has not deposited the ESI/PF of all workers who are engaged in work with us since...
This will confirm that the employer liability has been met with the requirements, and you will be safe for the future.
Hold all ESI/PF for future transactions, and even if the contractor has taken the ESI/PF amount from you and not deposited it, the ESI/PF department will take care of this and they will send a legal notice to the contractor.
Best Regards,
Sajid Ansari - Delhi
From India, Delhi
You can send an application to your nearest ESI/PF department regarding the PF/ESI amount that has been paid to the contractor, and said contractor still has not deposited the ESI/PF of all workers who are engaged in work with us since...
This will confirm that the employer liability has been met with the requirements, and you will be safe for the future.
Hold all ESI/PF for future transactions, and even if the contractor has taken the ESI/PF amount from you and not deposited it, the ESI/PF department will take care of this and they will send a legal notice to the contractor.
Best Regards,
Sajid Ansari - Delhi
From India, Delhi
My dear In this case principal employeer is responsible i.e. it will be your responsibility to ensure contractor must deposit emploee P.F., ESI, Sunil Prabhakar Manager HR
Dear Mr. Govind,
It is the primary responsibility of the principal employer to comply with the provisions of the ESI Act, 1948 in respect of all the employees engaged either directly or through an immediate employer (contractor) in the first instance under section 40 of the Act. Section 41 empowers you to deduct the contributions from the immediate employer (contractor) from his bills or any amount payable to him. If the contractor is already covered under the Act with a separate code No., as a principal employer, you have to insist the contractor to submit a copy of the challan, copy of Register of employees, wage sheet of the labor deployed at your site as provided under section 41(1A) of the Act. It is mandatory, and the principal employer cannot escape from the statutory responsibility of the payment of contributions under any circumstances. There is a clear-cut case of the Honorable A.P. High Court in the case of M/s Bajrang Jute Mills vs. ESIC.
The same position holds true in the case of PF as well. Hence, it is advisable to ensure statutory compliance like ESI/PF before settling his claims.
Thank you.
From India, Hyderabad
It is the primary responsibility of the principal employer to comply with the provisions of the ESI Act, 1948 in respect of all the employees engaged either directly or through an immediate employer (contractor) in the first instance under section 40 of the Act. Section 41 empowers you to deduct the contributions from the immediate employer (contractor) from his bills or any amount payable to him. If the contractor is already covered under the Act with a separate code No., as a principal employer, you have to insist the contractor to submit a copy of the challan, copy of Register of employees, wage sheet of the labor deployed at your site as provided under section 41(1A) of the Act. It is mandatory, and the principal employer cannot escape from the statutory responsibility of the payment of contributions under any circumstances. There is a clear-cut case of the Honorable A.P. High Court in the case of M/s Bajrang Jute Mills vs. ESIC.
The same position holds true in the case of PF as well. Hence, it is advisable to ensure statutory compliance like ESI/PF before settling his claims.
Thank you.
From India, Hyderabad
Before hiring a contractor, there are a few things you should follow:
1. Submit an application to the labor commissioner in Form 1.
2. Ensure the contractor has a license to employ contract labor.
3. Verify that the contractor is registered under ESI and PF.
4. When submitting the monthly bill, ensure that Xerox copies of the PF and ESI payment challans are included.
5. Additionally, you can request Xerox copies of PF Form 2 and ESI Form 1.
Remember, precaution is better than cure.
Sarfaraz
From India, Bangalore
1. Submit an application to the labor commissioner in Form 1.
2. Ensure the contractor has a license to employ contract labor.
3. Verify that the contractor is registered under ESI and PF.
4. When submitting the monthly bill, ensure that Xerox copies of the PF and ESI payment challans are included.
5. Additionally, you can request Xerox copies of PF Form 2 and ESI Form 1.
Remember, precaution is better than cure.
Sarfaraz
From India, Bangalore
Hi,
You have been correctly advised by R. Dinesh. To be on the safe side, also get an Indemnity bond signed by the contractor, indemnifying the Principal employer against any claims towards payment of P.F, ESI dues, etc. Remember, in practically all the labor enactments, the contractor labor is included as an 'employee, a workman, or a worker'. Finally, it is the Principal employer's duty to ensure that the Contractor has fulfilled his statutory obligations. If not, the Principal employer becomes liable.
Cyril
From India, Nagpur
You have been correctly advised by R. Dinesh. To be on the safe side, also get an Indemnity bond signed by the contractor, indemnifying the Principal employer against any claims towards payment of P.F, ESI dues, etc. Remember, in practically all the labor enactments, the contractor labor is included as an 'employee, a workman, or a worker'. Finally, it is the Principal employer's duty to ensure that the Contractor has fulfilled his statutory obligations. If not, the Principal employer becomes liable.
Cyril
From India, Nagpur
i agree with Cyril. Dnt take risk and run away with the duty. Always the principal employer becomes liable in such cases. Cirus
From India
From India
Hi, as the principal employer, you will be responsible if your contractor defaults in paying his employees' PF/ESIC. To be on the safe side, ask the contractor to submit the previous month's PF/ESIC payment challan before releasing his current bills.
Regards,
nn
From India, Mumbai
Regards,
nn
From India, Mumbai
Dear,
The principal employer is responsible for the contractor's employees. If the contractor does not comply, then you can withhold 10% of the amount from their bill. Once the contractor deposits ESI and PF on the stipulated time, you can release the payment. The contractor must have separate codes for PF and ESI.
From India, Chandigarh
The principal employer is responsible for the contractor's employees. If the contractor does not comply, then you can withhold 10% of the amount from their bill. Once the contractor deposits ESI and PF on the stipulated time, you can release the payment. The contractor must have separate codes for PF and ESI.
From India, Chandigarh
If the contractor is employing more than 19 workmen, it is mandatory for him to have a license from the Labor Dept. Otherwise, in case of an industrial dispute, all employees will be treated as principal employers' employees. Please ensure he has a license issued by the Labor Dept. as per the Contract Labor Act and regulations.
For PF and ESI, please ask the contractor to submit a copy of the monthly challan as proof of deposit to your organization before clearing his bill. Also, ask the contractor to show his registration certificate with PF and ESI authorities. Alternatively, you can directly deposit the PF and ESI dues and deduct the amount from his bill.
Regards, S K Sinha 9818737335
From India, New Delhi
For PF and ESI, please ask the contractor to submit a copy of the monthly challan as proof of deposit to your organization before clearing his bill. Also, ask the contractor to show his registration certificate with PF and ESI authorities. Alternatively, you can directly deposit the PF and ESI dues and deduct the amount from his bill.
Regards, S K Sinha 9818737335
From India, New Delhi
Hello GovindSuresh & others. Both the PF and ESI Acts place the responsibility for compliance of PF & ESI on the Principal Employer. However, when the contractor complies with the provisions, the principal employer is relieved of this burden. Therefore, the principal employer must insist on PF and ESI challans regarding the contributions paid by the contractor for their labor with each bill. If the contract with the contractor is a contract for service (i.e., the contract defines performance based on output rather than the number of contract labor deployed and their attendance), it may not be feasible for the principal employer to verify the contributions made. In such cases, the PF & ESI registration of the contractor is beneficial. When the PF and ESI codes are held by the contractor, they become a separate establishment distinct from the principal employer, serving as a valid defense if the PF & ESI authorities question the contributions.
Ethically, the principal employer should confirm with the contract laborers whether they are receiving ESI benefits and should also request a copy of the contractor's six-monthly return to be displayed at the work premises. When making payments to the contractor while considering PF & ESI liabilities, ensure that the contractor does not unjustly profit at the expense of these vulnerable laborers.
Regards,
KK
Ethically, the principal employer should confirm with the contract laborers whether they are receiving ESI benefits and should also request a copy of the contractor's six-monthly return to be displayed at the work premises. When making payments to the contractor while considering PF & ESI liabilities, ensure that the contractor does not unjustly profit at the expense of these vulnerable laborers.
Regards,
KK
Hi,
During one of the training programs being conducted by me, one of the participants shared his experience regarding the coverage of employees under the Provident Fund Act. He informed that there are contractors who show a different set of workers for coverage under PF. These persons are their family members and relatives. The actual workers who are working don't get any benefits. I am told that this operates as a racket, with the connivance of inspectors, etc.
I wonder if anyone from this forum has come across such reports.
Cyril
From India, Nagpur
During one of the training programs being conducted by me, one of the participants shared his experience regarding the coverage of employees under the Provident Fund Act. He informed that there are contractors who show a different set of workers for coverage under PF. These persons are their family members and relatives. The actual workers who are working don't get any benefits. I am told that this operates as a racket, with the connivance of inspectors, etc.
I wonder if anyone from this forum has come across such reports.
Cyril
From India, Nagpur
In case of any non-compliance, you as the Principal Employer will be responsible.
Whenever you hire employees through a contractor or hire a contractor to do a job, please ensure:
1. Ensure that the contractor has registered themselves under the ESI & PF Acts and has Code Numbers for both ESI & PF. Ask the contractor to submit photocopies of the same. Validate the copies by verifying them against the original letters from the ESI & PF Authorities wherein the contractor has been allotted Code Numbers.
2. Request documented compliance on a month-to-month basis before releasing payments each month. For the current month, request compliance for the previous month. Copies of Challans validated against the originals will be the correct procedure.
Remember, in case of any violation, the Principal Employer will be held responsible and liable. Also, compliance under the Contract Labour (Regulation & Abolition) Act is mandatory.
Cheers!!! Vasant Nair
From India, Mumbai
Whenever you hire employees through a contractor or hire a contractor to do a job, please ensure:
1. Ensure that the contractor has registered themselves under the ESI & PF Acts and has Code Numbers for both ESI & PF. Ask the contractor to submit photocopies of the same. Validate the copies by verifying them against the original letters from the ESI & PF Authorities wherein the contractor has been allotted Code Numbers.
2. Request documented compliance on a month-to-month basis before releasing payments each month. For the current month, request compliance for the previous month. Copies of Challans validated against the originals will be the correct procedure.
Remember, in case of any violation, the Principal Employer will be held responsible and liable. Also, compliance under the Contract Labour (Regulation & Abolition) Act is mandatory.
Cheers!!! Vasant Nair
From India, Mumbai
Dear Mr. Govind,
Based on your queries:
1. Has your establishment taken a labor license to engage contract labor under the Contract Labor Act? Secondly, does the manpower supply contractor have a valid labor license from the labor department? Does the contractor have their own ESI & PF code numbers? If so, please request a letter from the contractor stating that they are solely responsible for making statutory payments like ESI & PF for the personnel working in your establishment. Also, obtain photocopies of ESI & PF challans from the contractor and keep them for any inspections (such as PF/ESI).
Thirdly, even if the contractor does not fulfill the above requirements, you can deduct the PF/ESI contributions from the bills payable to them and cover these payments under your company code from day one onwards.
I hope the above clarifies.
Thanks & Regards
From India, Hyderabad
Based on your queries:
1. Has your establishment taken a labor license to engage contract labor under the Contract Labor Act? Secondly, does the manpower supply contractor have a valid labor license from the labor department? Does the contractor have their own ESI & PF code numbers? If so, please request a letter from the contractor stating that they are solely responsible for making statutory payments like ESI & PF for the personnel working in your establishment. Also, obtain photocopies of ESI & PF challans from the contractor and keep them for any inspections (such as PF/ESI).
Thirdly, even if the contractor does not fulfill the above requirements, you can deduct the PF/ESI contributions from the bills payable to them and cover these payments under your company code from day one onwards.
I hope the above clarifies.
Thanks & Regards
From India, Hyderabad
First, see whether the contractor is a registered contractor. Ask your contractor to provide the PF & ESI challan monthly, along with a letter stating that this challan includes the PF amount of the workers. Also, take the list of all workers. If the contractor fails to pay the PF & ESI, the liability rests with your company. The challans of PF & ESI should be there for reference. If the inspectors from the concerned department visit for inspection, they will surely ask you for the same first.
Regards,
Prashant
9960633132
From India, Mumbai
Regards,
Prashant
9960633132
From India, Mumbai
Dear Govind,
The simple answer to your question is that only the principal employer is responsible for non-payment of the dues. As a principal employer, it is your duty to ensure that the contractor complies with all statutory requirements. Firstly, obtain a copy of PF & ESI registration from the contractor. Make all labor payments in the presence of your company representative. If possible, deposit the PF & ESI contributions directly with the concerned authority. In any case, as the principal employer, you are entirely responsible for everything.
Thanks,
Shiv Kumar
From India, Delhi
The simple answer to your question is that only the principal employer is responsible for non-payment of the dues. As a principal employer, it is your duty to ensure that the contractor complies with all statutory requirements. Firstly, obtain a copy of PF & ESI registration from the contractor. Make all labor payments in the presence of your company representative. If possible, deposit the PF & ESI contributions directly with the concerned authority. In any case, as the principal employer, you are entirely responsible for everything.
Thanks,
Shiv Kumar
From India, Delhi
Hi Govind and friends,
At the end of the day, the Principal Employer (PE) is liable for all non-compliance of the contractor. So, periodically, the PE should review the challans submitted with the appropriate authority.
Before engaging contractors, the following facts should always be considered.
----Before awarding a contract to the contractor----
The Principal Employer's nature of business should not be the same as the contractor's.
The contractor should have PF and ESIC codes; verify the same with the PF and ESI department.
The Principal employer must obtain a registration under the CL(R&A) Act 1970.
Issue Form V to the Contractor.
Submit Form VI-B with the appropriate authority for the commencement or completion of work.
--------Post-awarding the contract--------
Ensure that the contractor obtains a license under the CL(R&A) Act 1970.
Periodically verify the challans of PF, ESIC, LWF if applicable, wage register, OT register, fines, and advance register.
Form XII should be maintained by the PE.
Ensure that the Contractor submits a Half-yearly return in Form XXIV.
The PE should send their Annual return in Form XXV.
Do not supervise the labor of the Contractor directly to avoid an Employer-Employee relationship.
Do not issue a similar I-Card, Appreciation letter, or any communication on the letterhead of the Company to contractual workmen.
Sign off the Wage payment register that the salary was disbursed before the 7th of the month in the presence of a management representative.
Ensure your contractor complies with all labor laws applicable to him; otherwise, the PE will be responsible for the same.
Ensure your contractor has issued I-card, appointment letter, payslip, PF, and ESIC account numbers to all their employees engaged by him.
Regards, Shiv
From India, New+Delhi
At the end of the day, the Principal Employer (PE) is liable for all non-compliance of the contractor. So, periodically, the PE should review the challans submitted with the appropriate authority.
Before engaging contractors, the following facts should always be considered.
----Before awarding a contract to the contractor----
The Principal Employer's nature of business should not be the same as the contractor's.
The contractor should have PF and ESIC codes; verify the same with the PF and ESI department.
The Principal employer must obtain a registration under the CL(R&A) Act 1970.
Issue Form V to the Contractor.
Submit Form VI-B with the appropriate authority for the commencement or completion of work.
--------Post-awarding the contract--------
Ensure that the contractor obtains a license under the CL(R&A) Act 1970.
Periodically verify the challans of PF, ESIC, LWF if applicable, wage register, OT register, fines, and advance register.
Form XII should be maintained by the PE.
Ensure that the Contractor submits a Half-yearly return in Form XXIV.
The PE should send their Annual return in Form XXV.
Do not supervise the labor of the Contractor directly to avoid an Employer-Employee relationship.
Do not issue a similar I-Card, Appreciation letter, or any communication on the letterhead of the Company to contractual workmen.
Sign off the Wage payment register that the salary was disbursed before the 7th of the month in the presence of a management representative.
Ensure your contractor complies with all labor laws applicable to him; otherwise, the PE will be responsible for the same.
Ensure your contractor has issued I-card, appointment letter, payslip, PF, and ESIC account numbers to all their employees engaged by him.
Regards, Shiv
From India, New+Delhi
The principal employer is bound under the acts on PF, ESI, and CLRA to ensure that the contractor employed has followed the relevant rules under the acts in respect of the persons employed by him for the principal employer. Merely by giving the amount to the contractor will not make the principal employer free from his duties.
From India, Kolkata
From India, Kolkata
Hi Govind,
You are the principal employer with the legal liability and right to ensure the security of the personnel working within your premises. Your company has all the rights to verify the contractor's credibility with the ESI & PF office and the labor commissioner periodically or whenever necessary in the interest of the risk to your company's legal liability.
If anything is found to be in violation, you can bring it to the attention of the respective authorities. Failing to do so will result in joint responsibility in case of any unfortunate circumstances.
Nagarajan, Agent Advisor, Cholamandalam General Insurance and SBI Life Insurance
9884396009
From India, Madras
You are the principal employer with the legal liability and right to ensure the security of the personnel working within your premises. Your company has all the rights to verify the contractor's credibility with the ESI & PF office and the labor commissioner periodically or whenever necessary in the interest of the risk to your company's legal liability.
If anything is found to be in violation, you can bring it to the attention of the respective authorities. Failing to do so will result in joint responsibility in case of any unfortunate circumstances.
Nagarajan, Agent Advisor, Cholamandalam General Insurance and SBI Life Insurance
9884396009
From India, Madras
Dear,
Make a schedule for the contractors to submit their records, and ask everybody about the original records such as ESI, PF, PT, LWF challans, and put the xerox copies after inspection with you. Ask everybody to pay separate challans for your unit. Some contractors are not paying for the particular unit and are showing that they are paying all site challans at one time. Do not trust them; ask them about separate challans only. The Principal Employer is responsible for every statutory payment, so keep an eye on everybody. During inspection, you can understand all the rules and regulations. Some contractors are paying less to their employees and showing as per the rules in the wage register. Conveyance and traveling allowance are the most adjusted amounts you can find in this section.
Thank you. If you have any queries, please contact me at 9657716407.
From India, Pune
Make a schedule for the contractors to submit their records, and ask everybody about the original records such as ESI, PF, PT, LWF challans, and put the xerox copies after inspection with you. Ask everybody to pay separate challans for your unit. Some contractors are not paying for the particular unit and are showing that they are paying all site challans at one time. Do not trust them; ask them about separate challans only. The Principal Employer is responsible for every statutory payment, so keep an eye on everybody. During inspection, you can understand all the rules and regulations. Some contractors are paying less to their employees and showing as per the rules in the wage register. Conveyance and traveling allowance are the most adjusted amounts you can find in this section.
Thank you. If you have any queries, please contact me at 9657716407.
From India, Pune
Dear Shiv,
Thank you for your comprehensive reply. Could you please explain two terms in your response?
Firstly, it is advised not to directly supervise the labor of the contractor to avoid establishing an employer-employee relationship. Additionally, it is recommended not to issue similar identification cards.
We are in the process of hiring 25 sales staff across India through a contractor. What documents should we obtain from the contractor, and which records are we required to maintain?
Our responsibility will primarily involve tracking their attendance, while the contractor will manage the rest of the tasks.
Thank you.
From India, Delhi
Thank you for your comprehensive reply. Could you please explain two terms in your response?
Firstly, it is advised not to directly supervise the labor of the contractor to avoid establishing an employer-employee relationship. Additionally, it is recommended not to issue similar identification cards.
We are in the process of hiring 25 sales staff across India through a contractor. What documents should we obtain from the contractor, and which records are we required to maintain?
Our responsibility will primarily involve tracking their attendance, while the contractor will manage the rest of the tasks.
Thank you.
From India, Delhi
If the contractor is employing more than 19 workmen, it is mandatory for him to have a license from the Labor Department. Otherwise, in the case of an industrial dispute, all employees will be treated as principal employers' employees. Please ensure he has a license issued by the Labor Department, as per the Contract Labor Act and regulations.
For PF and ESI, please ask the contractor to submit a copy of the monthly challan as proof of deposit to your organization before clearing his bill. Also, ask the contractor to show his registration certificate with PF and ESI authorities. Alternatively, you can directly deposit the PF and ESI dues and deduct the amount from his bill.
Regards,
S K Sinha
9818737335
From India, New Delhi
For PF and ESI, please ask the contractor to submit a copy of the monthly challan as proof of deposit to your organization before clearing his bill. Also, ask the contractor to show his registration certificate with PF and ESI authorities. Alternatively, you can directly deposit the PF and ESI dues and deduct the amount from his bill.
Regards,
S K Sinha
9818737335
From India, New Delhi
My opinion in this regard is,
Firstly, as an employer, it is your responsibility to make an agreement with the manpower contractor after verifying all the legal formalities, such as whether the contractor is registered under the labor law, PF, ESI, and other mandatory policies of the state/central government. Once the employer finds that the contractor is registered, then there is a need to make an agreement stating that the employee is not liable for any statutory laws like PF, ESI, gratuity, bonus, etc.
Now, in your case, as mentioned by some of our friends, if your agreement states that you are not liable for any statutory laws, then your contractor is liable; otherwise, you are liable. Please correct me in case I have said something wrong.
Regards, Murthy
From India, Hyderabad
Firstly, as an employer, it is your responsibility to make an agreement with the manpower contractor after verifying all the legal formalities, such as whether the contractor is registered under the labor law, PF, ESI, and other mandatory policies of the state/central government. Once the employer finds that the contractor is registered, then there is a need to make an agreement stating that the employee is not liable for any statutory laws like PF, ESI, gratuity, bonus, etc.
Now, in your case, as mentioned by some of our friends, if your agreement states that you are not liable for any statutory laws, then your contractor is liable; otherwise, you are liable. Please correct me in case I have said something wrong.
Regards, Murthy
From India, Hyderabad
Mr. Govind,
It is your responsibility to check and clarify. At the end of the day, you are answerable to the government. You have all the rights to check and clarify with government authorities, and in turn, they will be on alert for the contractor to correct any issues found guilty.
S. Nagarajan
Agent Advisor
9884396009
From India, Madras
It is your responsibility to check and clarify. At the end of the day, you are answerable to the government. You have all the rights to check and clarify with government authorities, and in turn, they will be on alert for the contractor to correct any issues found guilty.
S. Nagarajan
Agent Advisor
9884396009
From India, Madras
Contractor has not produced the records during the audit, as they are no longer working with us. The Director of ESIC has ordered to pay the full contribution on the transactions made with the contractor. We have submitted a letter stating their independent code and have verified the same at our end. Kindly suggest what we can do if the contractor has not produced the records, and whether we can demand the inspection report of the contractor from ESIC.
From India, Mumbai
From India, Mumbai
Hi Friends,
It is clearly mentioned in the act that for any violations in statutory payments and compliance, the Principal Employer will be held responsible for the same. We cannot question the acts and laws; hence, Govind, you cannot say, "If I am paying the contractor, then how am I responsible for non-payment."
For example, if you pay fees for your son's education in the school and if he is not doing well in exams, whom will you hold responsible for his results? Who will the teacher call if he fails? Ultimately, you are responsible in the same way the principal employer is responsible as per the laws.
Kind Regards, Sanjeev
From India, Pune
It is clearly mentioned in the act that for any violations in statutory payments and compliance, the Principal Employer will be held responsible for the same. We cannot question the acts and laws; hence, Govind, you cannot say, "If I am paying the contractor, then how am I responsible for non-payment."
For example, if you pay fees for your son's education in the school and if he is not doing well in exams, whom will you hold responsible for his results? Who will the teacher call if he fails? Ultimately, you are responsible in the same way the principal employer is responsible as per the laws.
Kind Regards, Sanjeev
From India, Pune
Dear Friend,
As the Principal Employer, it will be your responsibility to ensure that the Contractor is complying with all statutory obligations. Additionally, as the Principal Employer, you will be responsible for any violations of the same by the Contractor.
Vasant Nair
From India, Mumbai
As the Principal Employer, it will be your responsibility to ensure that the Contractor is complying with all statutory obligations. Additionally, as the Principal Employer, you will be responsible for any violations of the same by the Contractor.
Vasant Nair
From India, Mumbai
Firstly, you should ask the contractor to obtain a license under the CLRA Act. Secondly, they need to obtain the ESI & PF code. In such a situation, if supervision is conducted by the contractor, the Principal Employer is not liable for either ESI or PF. However, if the contractor has not obtained the ESI & PF code, then the Principal Employer is liable and can deposit the contributions in their own code.
From India, Jamshedpur
From India, Jamshedpur
As a principal employer, you are responsible for the acts of omission and commission on the part of the contractor. One must take all precautions to ensure that statutory obligations are being complied with by the contractor. It would be safe to deduct the amount payable and remit the amount to the authorities concerned. Alternatively, ask the contractor to submit the copies of challans/receipts to the office.
We had come across a case where the contractor was paying the contribution of PF in the names of some family members while the workers employed were very different. It is advisable to keep checks on all records. Do not allow the contractor to take you for a ride.
Cyril
From India, Nagpur
We had come across a case where the contractor was paying the contribution of PF in the names of some family members while the workers employed were very different. It is advisable to keep checks on all records. Do not allow the contractor to take you for a ride.
Cyril
From India, Nagpur
Dear All, as a principal employer you are fully responsible for wage payment, pf, esi , but you are not responsible for bonus and gratuity of contarctual labours. Regards A.K.Gautam
From India
From India
Principal employer is liable for PF & ESI. If you have any doubt you pay and deduct from monthly payments made to contractor
From India, Jamshedpur
From India, Jamshedpur
It is the responsibility of the HR person to ensure and sign all the payments, whether statutory or related to employees. If a contractor does not pay any dues timely, it will be the direct responsibility of the employer.
V. K. Sharma - Human Resource
Brightstar Telecommunications India Ltd.
From India, Bangalore
V. K. Sharma - Human Resource
Brightstar Telecommunications India Ltd.
From India, Bangalore
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